TN bags Rs.4,790 Crore Refinery

In what may be termed as the single largest private sector investment in Tamil Nadu, Hyderabad-based Nagarjuna Group is investing Rs 4,790 crore in establishing a six million tonne petroleum refinery (1,25,000 barrels per day) in Cuddalore, 200 km south of Chennai.
After 4-5 years of uncertainty due to difficulty in getting the right partner, this large refinery project is set to take off in a big way in the coastal town with the unveiling of the plaque to mark the foundation stone of the refinery project by Tamil Nadu chief minister M Karunanidhi. The project will come up on 1,600 acres of land near Cuddalore. Implemented under the name of Nagarjuna Oil Corporation Ltd (NOCL), a subsidiary of Nagarjuna Fertilizers and Chemicals, the project is slated for commissioning by mid-2011.
The setting up of the refinery is expected to improve the availability of petroleum products in the state besides providing feedstock to chemical and petrochemical units that are expected to come up in the region. The refinery will produce Euro IV compliant auto fuels.The financial closure for the project has been achieved and it will have debt-equity ratio of 2:1. The entire debt portion of Rs 3,200 crore has been tied up with a consortium of banks led by IDBI and SBI. Nagarjuna Fetilizers will hold 51 per cent and Tata Petrodyne 30 per cent in the equity of the project. Other investors include Tamil Nadu Industrial Development Corporation holding five per cent, Cuddalore Port Development Company 10 per cent and the rest by Uhde of Germany. R Sankaran, president, project, Nagarjuna Oil Corporation Ltd said that the refinery project is highly competitive in terms of capital cost due to use of some of second hand equipment from a dismantled refinery in Germany.
According to P S Rao, advisor, NOCL, the company has purchased about 25 per cent of equipment for the proposed refinery at lower cost and saved Rs 800-1,000 crore on capital cost. Besides, the company has also outsourced some of the facilities such as jetty, crude resid facility, captive power plant and marketing terminals. The total cost of the outsourced facilities is about Rs 900 crore.
According to estimates, it costs Rs 1,400 crore to set up a million tonne refinery. But Nagarjuna claimed to have spent only about Rs 900 crore per million tonne for the Cuddalore refinery.